Russia facing EU legal hurdles over Nord Stream 2

Nord Stream 2:Russia’s plan to build a second natural-gas pipeline to Germany along the bed of the Baltic Sea may face hurdles as EU lawyers this week signalled that, in its current form, the project would not comply with a set of laws on energy-market liberalization.
The project, which Gazprom is hoping to build in collaboration with EON, Engie, Royal Dutch Shell Plc, OMV AG and BASF SE, includes an onshore section in Germany which may contravene a stipulation in the EU’s third energy package that prevents a gas provider from controlling the transmission business, a policy known as ownership unbundling.
The EU law applies not only to the onshore part of the Nord Stream 2 venture but also to the offshore section that falls under the territorial jurisdiction of Finland, Sweden, Denmark and Germany, according to a legal opinion by the European Commission’s Directorate General for Energy. “As both Gazprom and the EU shareholders control companies active in the production/supply they could have only purely passive minority rights in the transmission system operator,” it stated this week. Its opinion is not binding but it can influence the commission’s policy line.
This view contradicts the position of Russian export monopoly Gazprom PJSC, which has said it would only need approvals from the governments of those member states to lay the pipe, which is to run under the Baltic Sea.
The requirement for Nord Stream 2 to comply with the EU rules on the offshore part of the pipeline would be another blow to Gazprom, which the commission accused last year of market-power abuse. In 2014, a conflict over the third energy package led to Russia scrapping the South Stream project that would have piped gas under the Black Sea to Europe.
Gazprom and its European partners signed an agreement in September to expand Nord Stream’s annual capacity by 55 bcm, which would double its capacity and potentially enable it to meet around 30% of current EU demand. The new pipeline would circumvent Ukraine, which is struggling to avoid a default amid a conflict with Moscow-backed separatists in the country’s east, and would deprive it of transit fees.
While Nord Stream 2 argues a new pipeline is needed to ensure safe supplies in the coming decades amid the projected rise in gas demand, opponents of the project say it hurts EU cohesion and weakens the bloc’s Energy Union strategy aimed at integrating the region’s gas and power markets and improving its energy security.

Source: Bloomberg